Guidelines to Qualify for a 504 SBA Loan

SBA Loan

The Small Business Association (SBA) 504 loan package is designed to help small business owners with capital purchases to help grow the business. With a 504 loan, business owners can secure real estate to create a physical office space or storefront.

If you already have a facility, you can obtain a 504 loan to purchase long-life equipment or machinery for the business. A 504 loan cannot be used for refinancing existing loans, working capital or settling other debts. Rental property investments and speculation businesses are not eligible for 504 loans.

To apply for most SBA loans, your company must qualify as a small business under the North American Industry Classification System (NAICS) ratings, which are based on either the number of employees or net income depending on your industry. Instead of relying on NAICS industry ratings for the 504 loans, the SBA qualifies a small business provided that the last two years of financial reports show less than an average $2.5 million in net income after taxes and the company’s tangible net worth is less than $7.5 million.

The 504 loan program typically requires that 50 percent of your project funding be secured by a private lender. If approved, the 504 loan will cover 40 percent of your total cost. The business must contribute 10 percent of the overall project cost as part of the loan package. The assets acquired through the project are committed as collateral to secure the loan. The SBA also requires personal guaranties from each owner of the business.

You can obtain up to $1.5 million for a project that will help create additional jobs or save existing ones for the company. The program standard is to create or retain one position for every $65,000 provided by the SBA. Small manufacturers need to create or retain one position for every $100,000. If your planned investment is a response to public policies such as minority employment standards, complying with federal mandates or other development, you may qualify for up to $2 million.

For more information, go to SBA Loan at

Guidelines to Qualify for a 504 SBA Loan was last modified: February 15th, 2012 by Amit Kraidman
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